What type of life insurance invests premiums in the stock market to hedge against inflation?

Variable life insurance is designed to allow policyholders to allocate a portion of their premiums into various investment options, including stocks, bonds, and mutual funds. This investment strategy is particularly beneficial in hedging against inflation because, ideally, the value of the investments can grow at a rate that outpaces inflation over time. As the underlying investments perform, the cash value and potentially the death benefit of the policy can increase, offering the policyholder the opportunity for greater financial growth compared to traditional whole life or universal life insurance, which usually have a guaranteed growth tied to fixed interest rates.

In contrast, universal life insurance provides flexible premiums and death benefits but typically invests in a general account with a guaranteed interest rate, while graded premium whole life generally has fixed premiums that increase over time. 20 pay life policies, on the other hand, are whole life policies designed to be paid for only 20 years, also with no investment in the stock market. Thus, variable life insurance is uniquely positioned to leverage market growth for inflation protection.